Interest Rates Down, Costs Up: How Everyday Investors Can Still Can Still Make 2026 Stack Up

There are plenty of opposing factors to weigh up this year

Our Buyer Classification data shows that mortgaged multiple property owners, including ‘Mum and Dad’ investors, have recently returned to a normal presence in the property market, with their share of purchases nationally having risen from a cyclical lull of around 20% a few years ago to roughly 25% now. That’s in line with the long-term average.

But how might 2026 play out? As I see it, new investors or those looking to grow their existing portfolio will have plenty of opposing considerations to weigh up.

On the supportive side ….

Clearly, the shortening of the Brightline Test 18 months ago and the full reinstatement of mortgage interest deductibility for all properties in the current tax year are supportive for investors. Meanwhile, although the value of existing holdings may have suffered in the past 3-4 years (our national index is still down 18% from the early 2022 peak), the flipside is that lower prices make it easier to get another purchase over the line.

The falls in mortgage interest rates are also a huge boost for property investors, reducing the cashflow top-ups typically required for the next purchase.

And on top of all that, the LVR rules were loosened on 1^st December. Under the previous 5% speed limit for low-deposit lending to investors (<30% equity), it effectively meant no finance was available for existing properties, unlike exempt new-builds. But with that speed limit now up at 10%, some investors may find things a little easier.

…. but don’t forget the other side of the equation 

That said, insurance costs and council rates have already risen significantly lately and continue to increase. In an election year, we also already know that capital gains tax will be a talking point, and it would not be a surprise at all to see interest deductibility start to be discussed again, too. After all, Labour has removed it once, so you’d suspect that this could be on the cards again.

Meanwhile, the debt-to-income ratio limits remain lurking in the background, too. On the latest figures, ‘only’ about 11% of lending to investors (after exemptions such as new-builds and bank switches where the loan size is the same) is being done at a DTI>7, which remains well below the official 20% cap as well as the possible self-enforced 15% limit by the banks.

But high DTI lending has nevertheless been trending upwards as interest rates have come down, and any growth in house prices would also tend to require larger loans. As such, the DTIs loom as key theme for the year ahead. In addition, rents themselves are very weak at present (especially in Wellington), and ‘good’ tenants are hard to find. That’s an additional challenge for investors.

It’s also worth keeping in mind that long-run capital gains could be lower in future than they’ve been in the past, as the structural falls in mortgage rates flatten out, the tax system potentially changes, and land supply reaches a higher level.

Everyone will need to find their own balance

Ultimately, each investor will need to weigh these factors and make their own decisions. I suspect decent numbers will continue to buy, but it’d be understandable if others stay cautious.